While Reliance Jio remains the number of telecom operators in India in terms of subscriber market share, the gap between Jio and Airtel should narrow in the coming years. Analysts at ICICI Securities believe that Jio’s subscriber market share would peak in FY23 and then will see a slight decline from FY24 onwards. This is where Airtel would narrow its market share gap with Jio.
Analysts believe that Bharti Airtel would benefit from network strengthening in the B and C circles of the country. ICICI Securities said that Bharti’s adjusted gross revenue (AGR) market share should be at 36.1% in FY25E (32.7% in FY21) while Jio’s AGR market share at 39.3% (38.3% in FY21).
Not forgetting Vodafone Idea (Vi), ICICI securities said that Vodafone Idea Limited (VIL) would incur capex, but its AGR market share should remain below 20% for the foreseeable future despite winning back some market share.
Bharti Airtel Buying Expensive 700 MHz Spectrum Poses Risk to Company’s FCFE
The analyst said that Bharti Airtel would generate strong free cash flow to equity (FCFE) of more than Rs 200 billion over the coming years. It would help with reducing the debt the company has. With 5G spectrum purchase, Airtel’s net debt is expected to peak in FY23E. From FY24E, Bharti is expected to use the strong FCFE generation to reduce debt by 20% each year.
ICICI Securities said the only threat that is there for Bharti’s FCFE is the buying of expensive 700 MHz spectrum in the 5G auctions, which would take away the telco’s 18 months of FCFE.
The strong presence in adjacent businesses, including the FTTH, Airtel Payments Bank, data centre, and enterprise segment, is going to further help the telco in expanding free cash flow to equity. 5G is going to act as a catalyst for Bharti to grow enterprise revenues.
Note that earlier this year, Airtel Payments Bank also achieved a break-even point and is a profitable business for the company now.